Differences in wages

Differences in wages

1. Differences in wages within and between occupations

   • DIFFERENCES IN THE PRODUCTIVITY OF WORKERS- Industries with high productivity will pay a higher average wage or salary.
   • THE ELASTICITY OF SUPPLY OF LABOUR- The more inelastic the supply the higher the wage. Elasticity is affected by the skills,education and qualifications required for a particular job. i.e. a doctors salary is high because the supply of them is very inelastic.
   • TRADE UNION POWER- Strong trade unions may be able to negotiate a mark-up on the wage through collective bargaining
   • DIFFERENCES IN THE FINAL DEMAND FOR THE PRODUCT- Earnings are higher in booming industries
   • GOVERNMENT PAY POLICY- Many public sector workers have their annual pay determined by government- appointed pay review bodies. The government might hold down public sector pay to control its total spending and wage inflation in the economy.
   • Employer discrimination
   • DIFFERENT REGIONAL COSTS OF LIVING- It costs more to live in London than it does to live In Preston

2. National minimum wage

   • It is a pay floor introduced by the government, which sets a wage level below which producers can not legally go.
   • ARGUMENTS FOR MINIMUM WAGE
     • Higher tax revenue is received from the increased earnings of those who are in low paid jobs.
     • State benefits cost less - there is less need for benefit 'top uos'
     • Income is more fairly distributed across the population.
     • Poverty is reduced
   • ARGUMENTS AGAINST THE MINIMUM WAGE
     • It becomes more expensive to employ workers meaning that firms will cut jobs and unemployment will increase
     • Other workers will demand w=higher wages t maintain pay differentials.
     • Higher wage costs will lead to rising inflation.
     • Young and unskilled workers will loose out- firms will employ older.
     • Some firms may cut back on investment in worker training.
     • A minimum wage would not ease poverty because many poor income households do not have a low income earner.